Ashenafi Endale – Page 25 – Ethiopian Business Review

The construction sector is a crucial driver of economic activity – and has been the key to Ethiopia’s double-digit economic growth for the last decade. Despite its promise, the sector is plagued by inefficiency, with projects sometimes generating cost overruns of 60Pct or more, according to the World Bank. This trend, however, may change soon, as many private real estate management companies have proven that local, large-scale construction projects can be completed in a time- and cost-efficient manner. But what, if anything, will other public and private companies learn from this? EBR’s Ashenafi Endale spoke with industry insiders to learn more about what’s being done to make the country’s construction sector more efficient.

Numerous multilateral organisations, including the World Bank and African Development Bank, note that corruption is a severe hindrance to a country’s development goals. Despite this reality, corrupt practices manifest themselves in a number of ways in Ethiopia – perhaps most notably in the misuse of public funds used for mega construction projects. In some cases, monies that were given to these projects go missing, unaccounted for, or are misallocated, resulting in delays or overspending. These phenomena are especially problematic, as publicly funded projects are meant to benefit the general population and are usually beholden to strict deadlines and budgetary constraints. In fact, according to the Auditor General’s Report, the Ministry of Education and a number of public universities have mismanaged around ETB2.08 billion in the 2014/15 fiscal year. EBR’s Ashenafi Endale consulted stakeholders and research to gain more insight into the potential mishandling of public funds and offers this report.

While the country’s export sector has never performed up to the government’s expectations, figures from last fiscal year paint a grim picture. In 2015/16, Ethiopia earned USD2.8 billion from exports – about half the planned amount – and less than the roughly USD3 billion collected in previous fiscal years. As the government continues pursuing the GTP II, the export sector is at a crucial juncture – how to effectively address the problems that plague it, including fluctuating commodity prices in the international market. Experts offer a number of solutions, from diversifying exports to fixing key policy issues. EBR’s Ashenafi Endale spoke with exporters, government officials and economists to learn about the intricacies of this key economic issue.

The last version of the Addis Ababa Master Plan spurred riots in the State of Oromia due, in part, to accusations of unfair land acquisition. The latest draft version of the Plan, which will likely be ratified, has many residents in the capital upset, especially those who’ve had their homes demolished in the name of development. Of course, any drastic development plans are likely to receive mixed reviews from the public – but is the Addis Ababa City Administration handling its development and expansion efforts in the most efficient manner? EBR’s Ashenafi Endale spoke with government representatives, experts and residents to find out.

In order to achieve the targets established in the second phase of the Growth and Transformation Plan, a robust and efficient civil service is necessary. This is because government employees are responsible for monitoring and implementing development programmes as well as regulating, assessing and approving investments that come into the country. However, Ethiopia’s government offices are often critiqued for their inefficiency, cumbersome bureaucracy and, in some cases, corruption. Studies suggest this is due to the lacklustre compensation, even compared to other African countries. For example, in 2014 the average monthly salary for a civil servant in Kenya was USD679, a figure that stood at USD145 in Ethiopia. EBR’s Ashenafi Endale spoke with government representatives to learn about what’s being done to remedy this crucial policy issue.

While private equity is a relatively new concept in Ethiopia, some investors have hit the ground running, providing local companies with capital and capacity building that are otherwise difficult to find. One such firm is Schulze Global Investment. Its CEO, Gabriel Schulze, says his investment philosophy is focused on ‘frontier markets’. According to their website, these provide unique benefits because “their growth is often driven by factors that are intrinsic to the market – such as efficiency gains from the introduction of new technologies or management techniques.” In turn, they provide greater returns and investments have a significant impact on the local economy.

Local manufacturers face a cavalcade of challenges – foreign currency shortages, import logistics, and frequent power outages, among other things. However, a number of benefits are afforded to those who focus on exporting their goods. The underlying logic is to promote manufacturing and increase export earnings. But is this the best way forward? Some economists and local manufacturers say that a policy that focuses on the local market would benefit Ethiopia’s economy in the long run. EBR’s Ashenafi Endale spoke with industry insiders to learn more about the details of this debate and offers this report.

Last month, automated teller machines (ATMs) throughout Ethiopia were integrated, meaning a cardholder from any bank could use any ATM to access their accounts and withdraw money. This level of technological integration is a first for Ethiopia’s growing banking sector – and a step towards creating an economy that’s less cash-dependent and one marked by greater financial inclusion.
The company at the centre of this integration is EthSwitch, the industry-owned enterprise that develops innovative, technological banking solutions. EthSwitch’s founding CEO, Bizuneh Bekele, says that integration is central to their operating philosophy – not only integrating banks but also bringing more people into the formal financial sector.

The introduction of integrated automated teller machines (ATMs) means the banking sector is aligning itself with the technological practices of more developed nations. It also represents a logistical quagmire for banks that have established vast ATM networks and now have to share them with newer ones. EBR’s Ashenafi Endale spoke with banking sector insiders to learn more about the nuances of this issue.

Tax compliance in Ethiopia has a long way to develop. According to the International Monetary Fund (IMF), the amount of dodged taxes in the 2009/10 fiscal year amounted to ETB19 billion, which accounted for 5Pct of gross domestic product (GDP) that year. This money would have covered more than 20Pct of the amount the nation spends on the construction of the Grand Renaissance Dam. In order to reduce this, the government enacted a plan to improve tax evasion, particularly when it arises from contraband and illicit business activities. But all these years later, has the plan proved fruitful? EBR’s Ashenafi Endale explored the issue to learn the details of what’s worked and what hasn’t.

Private Companies Bring Efficiency to Construction

Misused Public Funds Fuel Government Mistrust

Ethiopia’s Export Sector: At a Critical Juncture

After Much Turmoil, Will the Latest City Master Plan Succeed?

Decent Pay: Ethiopia’s Key Public Service Issue

‘Ethiopia has come a long way and there is a lot to expect in the future.’

Should Ethiopia Integrate Import Substitution in its Industrialisation Policy?

‘[Our services] will help to Accelerate Financial Inclusion in Ethiopia’

ATM Integration: What will it Mean for Ethiopia’s Banking Sector?

Poor Tax Compliance System Leads to Tax Evasion-Nation Loses Billions